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UK Regulator Takes Aim at Behavioral Targeting

Karin von Abrams
eMarketer Senior Analyst

A watershed event

October 21, 2009 | Advertising & Marketing | Media Buying

The UK’s Office of Fair Trading (OFT) is launching an investigation into behavioral targeting of Internet ads, in an effort to ensure that consumers are protected from unfair practices.

The study will look broadly at all forms of online ad targeting in the UK market, but is understood to focus on behavioral targeting in particular.

The OFT’s announcement followed a three-week consultation period in fall 2009, during which members of the public and other interested parties were invited to give their views on how the OFT should conduct its evaluation.

Most marketers and publishers are eager to exploit online ad targeting, provided that the technology involved is robust and affordable. One-quarter of marketers polled by the European Interactive Advertising Association (EIAA) said they planned to use more behavioral targeting in 2009 than in previous years.

Online Marketing Tactics Which Marketers in Europe Plan to Use More in 2009 (% of respondents)

But large-scale implementations have been dogged by two issues: consumer ambivalence and legal hurdles.

The recent history of Phorm, a leading provider of “personalization technology”, is a case in point. The company was slammed (along with telecoms operator BT) for running secret trials involving tens of thousands of Web users in southern England in 2007. Since then Phorm has modified its approach and refined its technology to meet the demands of EU officials, who are charged with enforcing some of the world’s most stringent data privacy laws. Nonetheless, talks with potential ISP partners and online publishers have not yet brought Phorm into the market as an active player. The new OFT investigation will not help.

Consumers too are proving undecided in the face of online targeting. Several surveys have indicated that Web users were happy to be shown ads reflecting their browsing behavior.

But other studies pointed to doubts about the real nature—and potential dangers—of such analysis. For example, a mid-2008 poll of UK mobile phone users found they were more negative than positive about receiving behaviorally targeted ads on search engines, ads based on their online habits, or automated suggestions for new contacts on social networks. And consumers in the US may be averse to targeting, too.

Behavioral targeting is very tricky territory for everyone. Advertisers, publishers and ISPs all stand to gain enormously from technology that delivers relevant results to Web users. But many consumers are not convinced that their data will be kept safe and secure, and never traced back to them as individuals or households. Such doubts are amplified when they hear that the UK Information Commissioner and the European Commission continue to be concerned about targeting. The OFT investigation may be a watershed event.

The online ad probe is one of two studies announced by the OFT for final publication next year. The second will turn the spotlight on potentially misleading pricing practices online. In both cases, the OFT’s conclusions may lead to more restrictive laws or regulations, and the Competition Commission may investigate any firms that appear to be involved in anti-competitive activity.

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Check out today’s other article, “Fee vs. Free for Online Video.”



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